It's crunch time for open banking in the UK

As the proverb goes, ‘patience is a virtue’, and that’s something many of us are having to keep in mind this week as we await the Joint Regulatory Oversight Committee’s (JROC) report on the future of open banking in the UK. Fortunately, the Coalition for a Digital Economy (Coadec) has given us all something to sink our teeth into after releasing ‘The Great Open Banking Crossroads’. It’s a new report that shares both an up-to-date analysis of the UK’s Open Banking ecosystem and Coadec’s vision for the future, including a call on HM Treasury to design a new Open Finance scheme. 

Open Banking has contributed significantly to the UK’s economy

It’s undeniable that Open Banking has had a positive impact on financial innovation, with the technology powering new business models, reducing fraud, lowering costs, and increasing productivity… I could easily go on. That said, it’s still great to have the report confirm just how much of a significant impact it has had on the broader economy. It estimates that Open Banking has led to the creation of over 4,800 jobs and holds a value of at least £4.1 billion. 

The vision for the future of Open Banking

Quite rightly, Coadec states that Open Banking is at the tip of the iceberg in terms of what can be made possible in the future. Just look at the OBIE’s latest impact report which says in the six months to March 2022, there were 21.1m open banking payments compared with 6.1m in the same period the previous year. These figures are good - but they could be even better. To go beyond steady user adoption and put our foot on the accelerator there needs to be a relentless focus on improving the customer experience and driving greater trust in Open Banking through consumer protections. 

Coadec’s vision has a similar sentiment, stating that it’s vital to safeguard the integrity of the sector. They propose that the Open Banking Implementation Entity (OBIE) continues to be in place and actively enforces the CMA Order until a successor is in place. They’ve also called for both the FCA and CMA to double down on monitoring API standards, issuing fines for non-compliance. Their logic is that, without enforcement, the foundations on which the Open Banking sector is built are nothing more than sand. I agree. 

In March 2022, both Barclays and Lloyds were issued letters from the CMA after breaching Open Banking rules a combined 23 times in 2021. Then, at the start of 2023, the CMA publicly announced that it would be closely monitoring HSBC’s future compliance closely after the bank reported it breached rules more than 50 times. In each of the incidences, no fines were issued. Whilst the cases were assessed and this may have been the appropriate outcome, it begs the question - how can we look to the future if organisations aren’t fully complying with the existing mandatory standards? How can we gain trust and build the best in class Open Banking innovations if the people we seek to collaborate with are doing the bare minimum? 

It’s time to seize the opportunity and act

It’s crunch time for Open Banking. We need a strong, independent successor to the OBIE, and Coadec is absolutely justified in calling for the Government’s full support to seize the opportunities that lay ahead of us - starting with HM Treasury doing a full consultation on an Open Finance Scheme. 

There’s a lot to do, but establishing a future entity, fixing consistency issues and building out what we’ve started, such as Variable Recurring Payments, is a great place to start - so, let’s crack on.